Analysts: Recent Automotive Job Cuts Are Just the Beginning

Matt Posky
by Matt Posky

Over the last six months, automakers have announced roughly 38,000 job cuts as part of global restructuring efforts. While such things are typically part of the normal ebb and flow of the industry, the ebb could be a prolonged one as manufacturers seek ways to mitigate the high cost of tech and figure out what their businesses should look like in the 21st century.

A litany of other issues are impacting jobs. China’s economy turned out to be less stable than presumed, trade tensions have escalated in practically every major market that builds cars, and most of the developed world appears to be nearly tapped out in terms of sales growth.

As a result, analysts are growing concerned that the layoffs we’ve seen thus far are just the beginning. But they’re not the only ones. Industry insiders are also willing to admit that times are changing — and rather drastically.

Bloomberg, which has tabulated scheduled layoffs since late last year, did the same for the comments of industry experts attempting to forecast tomorrow. The prognosis could be better.

Let’s start with Ford. Careful not to announce layoffs in lump sums, the manufacturer has promised a 7,000 global staffing reduction as part of its cost-cutting goals. While most of those have been in Europe, with more reported to come focusing on Germany and Ford’s joint operations in China, analyst Adam Jonas of Morgan Stanley said that won’t be nearly enough to reach the stated profit goals of “Smart Redesign.”

“Auto companies globally are contemplating life where global production has greater downside risk than upside,” Jonas wrote in a report on Tuesday. “Ford disclosed that the 7k headcount cuts will save $600 million annually, or an average of $86k per worker … [our calculations] require more than a further 23k salaried headcount reductions.”

For what it’s worth, Ford says it’s doing more than just trying to promote financial fitness amid trying times. It’s changing as a business by moving into electrification, data, mobility services, and all that other tech crap the industry can’t seem to get away from. But it would be unfair to single out the Blue Oval, as most large automakers are doing the same thing to varying degrees.

Daimler’s departing CEO, Dieter Zetsche, said as much while handing over the corporate reins to Ola Källenius this week. “Everything is under scrutiny,” he told shareholders in Berlin on Wednesday. “We cannot and will not be satisfied with the current level of profitability.”

The company has yet to confirm anything, though reports out of Germany claim Daimler could reduce its own headcount by as many as 10,000 employees, and soon. Meanwhile, executives are stressing the importance of improving financial efficiencies.

Dr. Z cited all the usual culprits, specifically the high development cost of new technologies and the fleshing out of Mercedes’ product range, but added that the entire industry is going through a period of change. He said it was up to automakers to prove the change was viable and that electric vehicles must be made profitable to show investors that their money is not ill-placed.

Again, easier said than done. Tesla, for all of its success, has had one hell of a time making EVs work for its bottom line. Its share price has tumbled through 2019. Demand is also down, leading some to believe that this could be a very bad year for the company. However, it’s not just Tesla that needs to worry about sales.

Bank of America Merrill Lynch analyst John Murphy said he believes the entire industry is headed for a “significant downturn,” adding that China’s lackluster performance as a market is leaving many automakers scratching their heads. But, once they’ve stopped, their next move could be issuing more pink slips — as there likely won’t be enough cash leftover to pay for mobility projects, R&D, and non-essential employees.

[Image: Daimler AG]

Matt Posky
Matt Posky

A staunch consumer advocate tracking industry trends and regulation. Before joining TTAC, Matt spent a decade working for marketing and research firms based in NYC. Clients included several of the world’s largest automakers, global tire brands, and aftermarket part suppliers. Dissatisfied with the corporate world and resentful of having to wear suits everyday, he pivoted to writing about cars. Since then, that man has become an ardent supporter of the right-to-repair movement, been interviewed on the auto industry by national radio broadcasts, driven more rental cars than anyone ever should, participated in amateur rallying events, and received the requisite minimum training as sanctioned by the SCCA. Handy with a wrench, Matt grew up surrounded by Detroit auto workers and managed to get a pizza delivery job before he was legally eligible. He later found himself driving box trucks through Manhattan, guaranteeing future sympathy for actual truckers. He continues to conduct research pertaining to the automotive sector as an independent contractor and has since moved back to his native Michigan, closer to where the cars are born. A contrarian, Matt claims to prefer understeer — stating that front and all-wheel drive vehicles cater best to his driving style.

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  • Volvo Volvo on May 24, 2019

    The technical obsolescence you talk about is not a flaw but a feature.

  • Buickman Buickman on May 25, 2019

    effective marketing will separate winners from losers

    • See 2 previous
    • Mcs Mcs on May 26, 2019

      @SuperCarEnthusiast From Chevy Blazer Ad: "It looks like a piece of candy" "This is my sexy mom car" "I would feel like a cooler dad" "I don't know who they got to design this but give them a cookie and a star" Makes you want to run out and buy one. To be honest, I think the ad insults peoples intelligence. Do they think people are so stupid that they'll run out and buy one after seeing that ad? Does the thing really look like it would make you sexier or cooler? https://www.ispot.tv/ad/IvFL/2019-chevrolet-blazer-speaks-for-itself-t1#

  • V8fairy Absolutely no, for the same reasons I would not have bought a German car in the late 1930's, and I am glad to see a number of other posters here share my moral scruples. Like EBFlex I try to avoid Chinese made goods as much as possible. The quality may also be iffy, but that is not my primary concern
  • Tsarcasm No, Japan only. Life costs by Rank:#1 - House (150k+)#2 - Education (30k+)#3 - Automobile (30k+) why waste hard earned money in inferior crap => Korean, Chinese, and American cars are trash. a toyota or honda will last twice as long.
  • Tassos In the 90s we hired a former PhD student and friend of mine, who 'worked' at GM "Research" labs, to come work for us as a 'temp' lecturer and get paid extra. He had no objection from GM, came during the day (around 2 PM), two hours drive round trip, plus the 1.5 hour lecture, twice weekly. (basically he goofed off two entire afternoons out of the five) He told me they gave him a different model new car every month, everything (even gas) paid. Instead of him paying parking, I told him to give me the cars and I drove them for those 90 mins, did my shopping etc. Almost ALL sucked, except the Eldo coupe with the Northstar. That was a nice engine with plenty of power (by 90s standards). One time they gave him the accursed Caddy Catera, which was as fun driving as having sex with a fish, AND to make it worse, the driver's door handle broke and my friend told me GM had to pay an arm and a leg to fix it, needed to replace almost the whole damned door!
  • 3-On-The-Tree I only buy Toyota cars. But if the Chinese cars are cheap people will buy them. They don’t care about the above issues that were stated in this forum.
  • Tassos Ford models are like dumb Hollywood movies. The original is far better than their god damned sequels. This was true of the Mustang vs the II, AND the Capri vs its second gen, and their BEV PORKER atrocities many decades later
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